Preparing for trade in services negotiations in the context of a comprehensive CFTA
JB Cronjé, tralac Researcher, comments on trade in services in the Continental Free Trade Area (CFTA) negotiations
The negotiations to establish a Free Trade Area amongst the Member States of the African Union will commence in 2016. The Continental Free Trade Area (CFTA) aims to establish a comprehensive and mutually beneficial trade agreement. According to the adopted Objectives and Guiding Principles for Negotiating the Continental Free Trade Area (CFTA) “the scope of the CFTA negotiations shall cover trade in goods, trade in services, investment, intellectual property rights and competition policy. CFTA negotiations shall be conducted in two phases. The first phase shall cover negotiations on trade in goods and trade in services. There shall be two separate legal instruments for trade in goods and trade in services to be negotiated in two separate tracks. The second phase shall cover negotiations on the following areas: investment, intellectual property rights and competition policy.” Within this broad framework, Members States should consider the best possible approaches and modalities for the negotiation of a cutting edge trade in services agreement that can cater for the needs and challenges of African businesses in an increasingly complex and integrated world of trade in tasks. It means that the structure and content of agreed trade rules must be designed in such a way in order for its intended beneficiaries to understand and use the Agreement.
Ideally, a trade in services agreement should be attached to an overarching agreement providing a common vision and institutional framework (including the establishment of a secretariat and rules on decision-making, membership, accession, withdrawal, entry into force and dispute settlement) for preferential trade governance among the Members. Therefore the agreements on trade in goods and services as well as any associated legal instruments on, for example, intellectual property rights, investment, competition etcetera will form integral parts of a single comprehensive CFTA Agreement. Equal to the trade disciplines for goods where a diversity of norms govern goods trade (including trade remedies, sanitary and phytosanitary measures, rules of origin, non-tariff barriers, customs cooperation), an agreement on trade in services with a set of horizontal disciplines applying across the board to all services must be supplemented by multiple sectoral annexes.
Horizontal disciplines must be forward-looking and should include a standstill clause to lock-in the applied regulatory regimes of Members; automatic binding (ratcheting) of autonomous liberalisation to keep commitments on par with policy status quo after the entry into force of the CFTA; automatic coverage of any new services that may emerge over time; the phase in of commitments at set future dates to provide adequate time for Members to undertake domestic reforms; and, national treatment. The incorporation of these disciplines in the trade in services agreement of the CFTA is needed to overcome one of the major design weaknesses of the World Trade Organization’s General Agreement on Trade in Services. Fortunately, many of these disciplines have been adopted by Members in services trade negotiations at regional level and are therefore nothing new.
Horizontal regulatory disciplines on licensing and qualification requirements and procedures as well as technical standards are needed to ensure regulation is not more burdensome than necessary to achieve legitimate policy objectives. In addition and in support of such disciplines, Members should consider the acceptance of government-wide disciplines to strengthen the right of individual Members to adopt domestic regulation and to address the challenges presented by the interconnectedness of services sectors and economies at government level. These good governance disciplines should emphasise the principles of open government; the importance of regulatory impact assessments during the early stages of regulation formulation; the development of policies on the roles and functions of regulatory agencies; the establishment of mechanisms to review the legality and procedural fairness of regulation and its application; the application of appropriate risk management practices to ensure regulation is targeted and effective; the adoption appropriate coordination mechanisms to promote regulatory coherence; and, the consideration of international standards in the development of all domestic regulation. The adoption of regulatory disciplines is not revolutionary in any way but it is necessary to enable the intended beneficiaries of the CFTA to do business in a transparent and predictable manner on the African continent.
The horizontal disciplines should be supplemented by sector-specific disciplines on regulation and market opening. The development of disciplines to address specific regulatory and competition issues that are unique to particular sectors (including financial services, telecommunications and business services; logistics, transport and distribution services; and, professional services) should precede discussions on market opening. A cluster approach should be considered. For example, due to technological advances small and medium sized enterprises can supply services remotely. This has enabled them to grow and create jobs locally whilst participating in regional and global value chains. The CFTA can assist them in overcoming significant challenges through the adoption of disciplines on e-commerce guaranteeing non-discriminatory treatment of digital products, electronic authentication and digital certificates and online consumer protection. Equally, the CFTA can, through the adoption of pro-competitive regulatory disciplines on telecommunication, ensure they have access to the most efficient and cost-effective service providers and thereby reducing their cost of doing business.
Various sector specific regulatory bodies in the regional economic communities and at the Pan-African level have established structures for regulatory cooperation and development. This work should be acknowledged and form the basis for closer cooperation to achieve mutual recognition of licenses, standards and qualifications based on harmonisation or equivalence. The promotion of regulatory coherence through the adoption of horizontal or sector specific disciplines are increasingly regarded as essential elements for achieving competitiveness. Negotiations on market opening should focus on the setting of targets for full market access liberalisation and the time frames for their implementation. Less Developed Country Members could be afforded longer time periods for implementation. This approach provides for variable geometry and avoids expensive and time consuming request / offer market access negotiations.
The Guiding Principles for the Negotiation of the CFTA provides that an agreement on investment shall be negotiated separately from the agreements on goods and services. This offers an opportunity to develop a comprehensive set of investment norms for investment in goods and services. This would allow for the incorporation of mode 3 (foreign direct investment in services) principles into a generic instrument and to benefit from a more complete set of investment disciplines. By exploring the synergies between goods and services and between trade and investment trade negotiators can develop an agreement that would better respond to the realities of doing business in a world of trade in tasks.
Finally, a standalone set of disciplines should be developed to facilitate the visa-free movement of African tourists including business tourists. Responses to temporary labour mobility vis-à-vis permanent migration; and, the mutual recognition of qualifications and experience to facilitate the movement of skills could also be considered.